You'll need a 13 x 9-in. baking pan lined with nonstick foil; let foil extend over ends of pan.
Remove enough zest from grapefruit to measure 1/4 cup. Juice the grapefruit (you'll need only 1 cup juice).
Put zest, 1 cup of the sugar and 1/4 cup of the juice in a blender; purée. Pour into a 6-qt saucepan. Stir in remaining 2 1/2 cups sugar and 3/4 cup juice. Stir over medium heat until sugar dissolves and mixture comes to a boil.
Let boil gently for 4 minutes, stirring occasionally. Stir in butter; boil 3 minutes longer, stirring occasionally. Remove from heat; stir in pectin and food color until incorporated and color is light red. Quickly pour into prepared pan and spread with offset spatula.
Let stand at room temperature until jelly is firm to the touch, about 2 hours.
To cut and decorate: Put 1 cup sugar on wax paper or a plate. Lift foil by ends onto cutting board. Cut with 1 1/2" cookie cutter (or into 1 1/4-in. squares). Lift shapes from foil to sugar and turn to coat on all sides. Scraps can be cut into small shapes and sugared, or discarded.
Storage Tip: Store in airtight containers with wax paper between layers at cool room temperature, or in refrigerator for up to 3 weeks.